Answer to Question #50504 in Microeconomics for nidhi
If she falls ill - Rs. 25.
(a) As there is not enough data to answer the questions (probabilities and utility functions are not provided) Sita may accept the insurance, if the probability of illness is too high and the insurance payment is affordable. (b) The maximum amount that Sita would pay for the insurance can be calculated according to probabilities, which are mentioned, but not provided. But this maximum amount will be less than 100 - 25 = Rs. 75.
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